ETNO ThinkDigital interview – The right balance between investment and competition

Can you identify the key outcomes of your study on the telecom sector. What is the situation today? What can be improved?

The image is striking. Between 2006 and 2013, investments increased by 39 % for 4 major US operators while, in the same period, they fell by 5% for seven major European operators. This trend is even more obvious when focusing on the mobile business with a triple digit growth of investment for some US operators. This situation has had an impact on the deployment of new technologies such as 4G, and we noted a delay in this field in Europe in late 2013. Nowadays, the gap regarding 4G deployment is reducing and fortunately European operators have not stopped investing. Their investments were less significant and in line with the decline observed in their income over the same period.

How do you see telecom business models evolving over the next five years?

The telecom industry has to increase margins to address the sector's investment needs. Several approaches are possible and the solution will likely involve a combination of these. Thus, market concentration seems inevitable and European operators are already involved in mergers. This concentration will probably be accompanied by fixed/mobile convergence and streamlining cost structure. Moreover, growth drivers are probably in the promotion of mobile Internet and data usage, a trend already clearly established in the US. For instance, the consumption of "data" was twice as high in the US (810 MB) compared to Europe (415 MB) in 2013.

What are the current barriers to investment in Europe and can you suggest solutions to remove them?

As already mentioned, the decline in operators' revenues in Europe is an important matter in order to understand the level of investment but it is not the only one. Other factors must be considered such as the diversity of national regulatory environments.

You indicate in your study, that there are over 100 operators in continental Europe serving more than 640 million subscribers while in the US there are only 5 operators with more than 1 million subscribers and in China the 3 most important operators serve 1.2 billion subscribers. What do you think is the way forward to guarantee the best services for consumers in Europe?

If we are talking about regulated environments, competition is of course essential but should be done in a framework that is conducive to investment. The future is therefore in this search for a balance that guarantees a long-term investment policy.

ETNO believes that it is vital to promote investment while safeguarding competition. How can Europe find the right balance in the current competitive landscape?

We share your view, the challenge is to find that balance. Today operators are trying to find it at national level. It can be difficult for regulators to ensure a sufficient level of competition when mergers are being considered. Perhaps we should empower operators to think differently within their markets and to consider competition at European level in a wider market. In this sense, fixed-mobile convergence and a unified regulatory environment are likely a medium-term solution.

Achour Messas, 40 years old, is a graduate of Supelec, a French engineering school. He joined Mazars in 1999. He has a wide experience in the audit and consulting for large and complex international groups. He has extensive experience of the Telecommunication and Utilities sectors.

Mazars is an international, integrated and independent organisation, specialising in audit, accountancy, tax, legal and advisory services. Mazars and its correspondents operate throughout 87 countries. 73 of these countries are part of Mazars’ integrated partnership and draw on the expertise of over 15,000 professionals to assist major international groups, SMEs, private investors and public bodies at every stage of their development.